Bad Debt Collection: Frustrating, But Helps Recovery

2007-03-08 10:33:40

( Financial )



Bad debt can have a tremendous effect, and even lead small businesses to collapse. The last thing that you want when you're managing a small business is to spend time and resources for bad debt collection. You have to be wary when a customer starts delaying payments, or declines to pay the debt without valid reasons.

But if you already have a list of customers who have incurred bad debts, you can still do something about it. You can either do the collection yourself, or hire a bad debt collection agency. Should you decide to collect bad debts on your own, you have to use all the information you gather about the debtor and maintain a record in all transactions you have relating to bad debt collection.

You should always be professional in seeking bad debt collection, especially when you call your debtor by phone. To comply with federal debt collection practices, you must only make calls from 9am to 8pm and don't ever mention the bad debt to anyone except the debtor. You can offer more lenient terms of payment, if the customer appears to be having financial problems. But if no payment has been made after several communications, you may want to seek the help of professional collection agency.

Agencies specializing in bad debt collection may require you to pay a small fee, or ask for a certain percentage rate based on every successful result. These agencies have skills and confidential sources of information that may not be available to you, and apply effective methods in pursuing bad debt collection.

When all else fails with your and the agency's collection efforts, you can take legal action. But before you do this, you should evaluate if the business bad debt is really worth pursuing. Be aware that court processes are frustrating and expensive; besides, the loss is tax-deductible.


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